Characteristic combinations

I have to implement the following scenario/
I have product as a characteristic.  But it is actually product category.  There are 8 categories.  Each category has 1 to 10 products.    How do I implement this?
Product categories: x1, x2, x3, …, x8
X1 --- has x11, x12, x13, x14 products
X2 --- has x21, x22, x23 products
X8 --- has x81, x82, x83 products
When I display these things in planning book, I like to drill down to product category, product etc.
You help is highly appreciated.

Thank you Siva:
So, now I can assign attributes to characteristics and to that attribute (I belive we can) add more attributes and thus we can create a hierarcy of attributes.
Thus we can represent the product group --> product --> product Item --> color produt item.  etc.
is it good to attach anther charactistic or attributes?
my probelms is ...
product group
      has many products
           each product has seveal proudct.
enfif
endif
please correct me if I am wong. 
Thanks
Steve

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